Deutsche Bank's U.S. business seems to be a sickly sort of place to be. With four new regional CEOs in a three-year period, big cuts to the U.S. equities business last year, substantial cuts to the U.S. repo business and an official designation of "troubled" from the Fed last June, good news has been sparse.
Today brings further bad news with a Financial Times article claiming 40% of Deutsche's biggest shareholders want the U.S. business to be cut further. One suggests DB should cut the assets allocated to its U.S. business from $132bn to $50bn, bringing it below the regulatory threshold for an “intermediate holding company.”
The good news is that there is no indication that DB intends to do this. The bank didn't comment for this article, but a spokesman told the FT that the bank's U.S. footprint has already been adjusted. - There are no plans for further adjustments in 2019.
This may be so, but as Deutsche's U.S. operation struggles to justify its existence, some existing staff are concerned about new recruits.
Deutsche Bank Securities has nearly 2,000 registered employees in New York City, according to FINRA. In the past 18 months, it's been adding to them with strategic hires at managing director (MD) level.
In fixed income, these recruits include Drew Meaney, whom the bank secured from Cantor Fitzgerald for U.S. credit trading in December 2018. At the end of 2017, Deutsche hired Paul Huchro from Goldman Sachs to head U.S. credit trading and Jeffrey Chang from UBS as head of high yield corporate bond trading. Last year was their chance to make a difference. In fact, Deutsche's fixed income revenues fell 17% globally in 2018 and 40% year-on-year in the last quarter.
In equities sales and trading, Deutsche Bank hired James Rubenstein from UBS as a NY-based head of electronic equities in October in 2018. Peter Selman, whom Deutsche hired as its head of global equities at the end of 2017, told the Financial Times in December 2018 that the bank plans “quite a bit more” equities hiring this year. Under previous CEO John Cryan Deutsche already added Eric Johnston from Millennium Capital in 2017. A report in 2016 said the German bank was hiring 100 people globally, including in NY, to bolster its equities business.
One New York headhunter says Deutsche's U.S. traders are already worried about their new colleagues and plans to hire more, particularly in a year when bonuses are likely to be down. Rightly or wrongly, Deutsche has developed a reputation for paying generously to attract new people and existing staff fear being short-changed.
Not everyone at DB is gloomy though. One employee points out that if the FT contacted 10 shareholders and four were disapproving of the U.S. strategy then six thought it was ok: "A majority were in agreement," he notes.
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